Throw Them All Out (13 page)

When news of the loans to First Solar became public, the company's stock jumped more than 6%.
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For Goldman, it was just one Obama-era payoff. It also raked in another $90 million commitment for a solar site in Colorado, which was being developed by Cogentrix, a wholly owned subsidiary of Goldman Sachs. And U.S. Geothermal, in which Goldman was the second-largest shareholder, was given a $96.8 million guaranteed loan. It was the first geothermal project to complete a loan guarantee from the Department of Energy.
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The DOE handed over $102 million in loan guarantees to Record Hill Wind to build a wind farm in Maine. And who heads up Record Hill? Former Governor Angus King, along with Robert Gardiner, the former head of the Maine Public Broadcasting System. Neither has a background in energy. King, however, endorsed Obama in 2008 and campaigned for him.

The other top recipients pulled down various amounts, and in almost every case the numbers and the cronyism were notable. In some instances these projects have been delayed because of local politics, but the federal money has been approved:

• The U.S. Treasury Department gave a $200 million grant to Peco Energy for a smart-grid network—that is, software and equipment designed to help utilities better monitor energy distribution and use. The company is owned by Exelon. Exelon executive Frank M. Clark (who is CEO of the company's ComEd unit) and board member John Rogers Jr. were both members of the Obama campaign's National Finance Committee. White House adviser David Axelrod was a longtime consultant for Exelon. For that $200 million, according to the same federal government audit, Peco (and Exelon) created a total of 102 jobs by December 2010.
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• On July 1, 2009, the DOE awarded $100 million to the Basin Electric Power Cooperative in tiny Beulah, North Dakota. The money was for a grant to install "smart meters" to monitor energy consumption. The co-op's partner, which is actually overseeing the work, is Powerspan, a small alternative energy company whose largest investors include Daniel Weiss and Zeb Rice of the Angeleno Group. As with Exelon, both of these executives served on President Obama's National Finance Committee. The other major Powerspan investor is billionaire financier George Soros, who was also an early Obama supporter. The timing of their investment and the government grant is interesting. On April 23, 2009, Powerspan revealed that the Angeleno Group and Soros were new investors. Less than two months later, Department of Energy Secretary Steve Chu announced the $100 million grant. It was a big deal for Powerspan, which had raised only half that amount in private capital up to that point. As of December 2010, a year and a half after Chu's announcement, a government audit revealed that this project had created eight jobs.
  
• $200 million went to Duke Energy for a smart-grid project. It also received $90.4 million for its Notress Windpower project in Texas, for which it had already started construction, in May 2008, and which would be finished in April 2009, just two months after the stimulus bill became law.
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  That $90 million was delivered in September 2009, after construction was completed.
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  For good measure, the Energy Department also granted environmental waivers for both projects.
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  Duke Energy CEO Jim Rogers is a major DNC contributor and had reportedly been on President Obama's shortlist for energy secretary in December 2008. In March 2011, as reported by National Public Radio, Rogers took the "unusual step" of committing corporate assets to obtain a $10 million line of credit for the National Democratic Convention in 2012.
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• A commitment of $308 million was made to Hydrogen Energy California, LLC, a joint venture between energy giant BP and the mining company Rio Tinto. BP appears to be the only major oil company that managed to receive substantial government support. According to the Center for Responsive Politics, BP gave more to Obama's political campaigns than to any other candidate over the past twenty years. In 2008, candidate Obama received $71,000 from the company. The project has created a whopping 23 jobs.
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• $115 million in taxpayer money was committed to a company called First Wind, for wind energy projects in Utah and New York. Both projects were already under way when the funds were awarded. The New York project had been started in 2007.
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  The largest equity stakeholder in the company is D. E. Shaw, a hedge fund that is one of the top three contributors to Democrats.
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  The founder of the fund, David Shaw, was an Obama bundler, raising more than $500,000 for the 2008 presidential run. (And like many of the others mentioned here, he is at work on the 2012 election.) D. E. Shaw also employed Larry Summers, who served as the head of President Obama's National Economic Council. Another 42% of First Wind is owned by Madison Dearborn Partners, an investment firm with close ties to then—White House Chief of Staff Rahm Emanuel. The founder of the firm, David Canning, had been a bundler for George W. Bush. But he switched sides in 2008 and gave heavily to Obama. Madison Dearborn gave more to Emanuel's congressional campaigns than did any other business. "They've been not only supporters of mine, they're friends of mine," Emanuel explained on one occasion.
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  In July 2010, First Wind also secured $117 million for a project in Hawaii called Kahuku Wind. It created 125 jobs. The plan was to secure taxpayer money and then go public. But in October 2010 First Wind had to delay its IPO because of weak demand.
  
• $135 million went to Sapphire Energy for an algae biorefinery, which would create "super algae" that could be converted into energy. ARCH Venture Partners is a major investor in Sapphire. Bob Nelsen, the founding partner, served on Obama's National Finance Committee during the 2008 campaign. Before 2007, Nelsen considered himself a Republican, but he switched sides. He was apparently the only Republican on Obama's finance committee.
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• The Treasury Department sent a $60 million stimulus to Vantage Wind Energy, LLC, which is a wholly owned subsidiary of Invenergy, LLC, a Chicago-based company headed by CEO Michael Polsky. Polsky is a major Obama donor and a financial supporter of the DNC who gave more than $30,000 to the 2008 Obama campaign and another $50,000 for the Obama inauguration. Invenergy also pulled in another $68 million in taxpayer money for the Beech Ridge Energy Wind Farm on September 22, 2010.
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• $1.5 billion was approved for Summit Texas Clean Energy, LLC. The company is a subsidiary of Summit Energy, located on Bainbridge Island, Washington. The company's CEO is an attorney named Eric Redman, who is a former staffer for a Democratic senator and a major DNC donor. Like the others mentioned here, his campaign giving appears to be entirely to one party. The project manager for Summit Texas Clean Energy is former Dallas Mayor Laura Miller, a Democrat. A former newspaper reporter and environmental activist, she is perhaps best known as the daughter of the former head of Neiman Marcus. She has never worked in the energy industry. As of this writing, Summit had created 8 jobs.
  
• $465 million in government loans went to Tesla Motors to build an electric car. Steve Westly, the venture capitalist, sat on the board of Tesla at the time, and his firm owned more than 2.5 million shares in the company. (He also personally owns an undisclosed number of shares.) Tesla founder Elon Musk was a major DNC contributor and in 2011 donated $35,800 to the Obama Victory Fund. (Steve Spinner was an adviser to Tesla before he joined the Obama campaign.) Tesla received its taxpayer loan in 2009 and went public in 2010. The IPO, made possible because of taxpayer money, made the initial investors even richer: the stock price surged 40%. Steve Westly made $1.2 million, and Musk $15 million. Since the IPO, Tesla's stock price has dropped and the company continues to lose money. Tesla's other major investors include Nicholas Pritzker, brother of Penny Pritzker, who was the Obama campaign's finance committee chair, and Sergei Brin and Larry Page, the founders of Google. The company's CEO at the time, Eric Schmidt, served as an informal adviser to President Obama. Dan Reicher, director of climate and energy initiatives at Google, was one of the founders of Cleantech and Green Business Leaders for Obama. When the administration proposed, in February 2011, to stimulate electric car sales by offering consumers a $7,500 rebate, stock in Tesla rose 6% on the news.
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  Google's billionaires were also investors in Brightsource, which won the large loan guarantee mentioned earlier. $275 million went to Solar City, to install solar panels on military bases. Solar City is headed by Elon Musk, and Google is a large investor.
  
• The Obama administration also gave $529 million in government-backed loans to Fisker Automotive. Fisker is building a high-end hybrid-electric sports coupe called the Karma, which will cost $89,000. Fisker's top investors include John Doerr and former Vice President Al Gore. Fisker continues to lose money and is heavily in debt.
  

Tesla and Fisker were in rare company. Only 5 of 130 applicants for the Advanced Technology Vehicles Manufacturing Program received funding. (Other recipients in the program were big automakers like Ford and Nissan.) Many of the rejected applicants complained of unfair treatment. In a letter to Secretary of Energy Steve Chu, electric car maker XP Vehicles complained that the company was never contacted by the Department of Energy. "DOE reviewers never even talked to the founder, inventor, engineers, project leads or primary contractors to obtain additional information. Why was staff at DOE during the course of the year positive about the outcome and never asked for additional information?" Other companies that were not politically connected and were shut out—Amp Electric Vehicles was one—expressed similar frustration.
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Overall, John Doerr was one of the biggest winners in the taxpayer sweepstakes. A billionaire Silicon Valley venture capitalist, Doerr has donated almost $2 million to Democrats over the past twenty years.
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His firm, Kleiner Perkins Caufield & Byers (where Al Gore is now a partner), gave more than $1 million to Democrats since 2005. Doerr was an early Obama supporter who opened doors in Silicon Valley and was named as an outside economic adviser and a member of the President's Economic Recovery Advisory Board. As a member of that board he called for increasing fines for carbon pollution and pushing for rules to encourage electric utilities to move to a smart-grid system. As Doerr put it, "God bless the Obama Administration and the U.S. government. We have really got the A-team now working on green innovation in our country." That A-team was busy, of course, rewarding some of Doerr's own investments.

Of the companies listed on Doerr's website as part of his Greentech venture-capital portfolio, well over 50% of them received taxpayer grants or loan guarantees through Obama's stimulus program. Of the 27 listed, at least 16 received direct taxpayer support in the form of loans, grants, or stimulus work: Altarock, Amonix, Amyris, Aquion Energy, Ausra (which was acquired by Areva), MiaSole, OSIsoft, Primus Power, Transphorm, Recyclebank, Silver Spring, Great Point Energy, Hara, Harvest Power, Lilliputian Systems, and Mascoma. Considering that the acceptance rate in most of the Department of Energy programs was often 10% or less, this is a stunning record. That $2 million Doerr had invested in politics may have provided the best return on investment he had ever seen. Among the results:

• Solar panel maker MiaSole received $102 million in special clean-tech manufacturing credits.
  
• $24 million went to another Doerr company, Amyris Biotechnologies. The DOE grant was to build a pilot plant to use altered yeast to turn sugar into hydrocarbons. (Steve Westly was also a major shareholder.) Just weeks before the grant was announced, on December 4, 2009, Senator Dianne Feinstein and her husband bought $1 million of equity in the company (November 18). It was their only transaction of the entire year.
  

With federal money in hand, Amyris went public with an IPO the following year, raising $85 million. John Doerr's firm, Kleiner Perkins, did very well, more than tripling its investment. A $16 million investment was now worth $69 million. It's not clear how Steve Westly or Senator Feinstein did, but it's safe to assume that they did well too. Meanwhile, Amyris continues to lose money, and the grant created forty jobs.
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Curiously, in 2011 Senators Tom Coburn and Ben Cardin introduced legislation to immediately repeal the ethanol tax credit. This would threaten biofuel makers such as Amyris. So Senator Feinstein introduced her own bill that would repeal the ethanol tax credit for corn-based ethanol only. That would leave the credit in place for Amyris and actually benefit the company by making competing forms of ethanol more expensive.
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• One of the biggest winners for Doerr was Silver Spring Networks, which provides "smart-grid projects." In 2008, Doerr and his partners invested $75 million in the company. Silver Spring doesn't receive grants from the federal government directly; it's a contractor for utilities and other companies that obtained grants to develop a smart grid. Close to 60% of Silver Spring's customers were winners of government grants, totaling more than $560 million.
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Silver Spring Networks won a lot of smart-grid projects because of how the stimulus bill was written. It was Al Gore, a partner with John Doerr at Kleiner Perkins, who inspired President-elect Obama not only to invest in clean energy but to put "billions more in the stimulus for construction of the so-called smart grid." Whether Gore revealed to Obama that he had his own money invested in Silver Spring Networks is not known.
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Gore was closely wedded to the Obama administration's alternative energy initiative, both directly and indirectly. President Obama asked Gore to serve as his "climate change czar," but the former vice president declined. In his place, Carol Browner, a Gore protégée, got the nod. Rahm Emanuel wondered openly whether Browner would work for Gore or Obama. "When Gore comes and chains himself to the White House gate, it will be Carol's problem," he told colleagues.
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